I’m so offended by the latest Obama canard, that the financial crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to begin. Not only does this Administration lie on a routine basis, it doesn’t even bother to tell credible lies. .And this one came directly from the top, not via minions. It’s not that this misrepresentation is earth-shaking, but that it epitomizes why the Obama Administration is well on its way to being an abject failure.
Which is the point that The Shrill One has been detailing in his blog lately - we're heading into Japan territory and do not appear to know how - or perhaps care enough - to stop it. Where Krugman gets it more right than Smith (though it is so satisfying to read Yves' smackdown) is that this is not simply a failure of ethics or honesty, though those are present, but that the root cause is a failure of politics (my emphasis):
On the Jon Stewart Show (starting roughly at the 1:10 mark on this segment) Obama claims the cost of this crisis will be less than 1% of GDP, versus 2.5% for the savings and loan crisis (hat tip George Washington, sorry, no embed code, you need to go here):
The reason Obama makes such baldfacedly phony statements is twofold: first, his pattern of seeing PR as the preferred solution to all problems, and second, his resulting slavish devotion to smoke and mirrors over sound policy. ...
... And that’s before we add in the costs of yet another aspect of the financial crisis, the failure to come up with a decent mortgage mod process. If the powers that be had been willing to resolve and restructure the debt of homeowners who could have been saved, ironically, the widespread failing of the mortgage securitization process might never have come to light. But we are now instead having a slow motion train wreck in the biggest asset class in the world, US residential mortgages. Anyone who thinks this isn’t going to result in a real toll on the balance sheets of the biggest banks is unduly optimistic. Banking industry experts Josh Rosner and Chris Whalen each expect another bailout in the not-terribly-distant future. So add more to the ultimate cost of the financial crisis.
But Team Obama is no doubt rationalizing this chicanery: if they can keep from recognizing losses until the recovery takes place, then the ultimate damage will be lower. But Japan’s post bubble record shows that doesn’t work. You simply don’t get a recovery with a diseased financial system. You need to purge the bad assets, only then will meaningful growth resume.
This is what happens when you need to leap over an economic chasm — but either can’t or won’t jump far enough, so that you only get part of the way across. ...Politicians lie because they are human - humans are the kind of creatures capable of misrepresentation. Politicians lie at about the same rate as the rest of humanity. Lies in and of themselves are not unique, nor are they necessarily the root cause of a problem. They are most often, as Yves scathingly details, used to cover up the failures, like trying to sweep a carcass under a rug.
The real story of this election, then, is that of an economic policy that failed to deliver. Why? Because it was greatly inadequate to the task. ...
If you look back now at the economic forecast originally used to justify the Obama economic plan, what’s striking is that forecast’s optimism about the economy’s ability to heal itself. Even without their plan, Obama economists predicted, the unemployment rate would peak at 9 percent, then fall rapidly. Fiscal stimulus was needed only to mitigate the worst — as an “insurance package against catastrophic failure,” as Lawrence Summers, later the administration’s top economist, reportedly said in a memo to the president-elect.
But economies that have experienced a severe financial crisis generally don’t heal quickly. From the Panic of 1893, to the Swedish crisis of 1992, to Japan’s lost decade, financial crises have consistently been followed by long periods of economic distress. And that has been true even when, as in the case of Sweden, the government moved quickly and decisively to fix the banking system.
To avoid this fate, America needed a much stronger program than what it actually got — a modest rise in federal spending that was barely enough to offset cutbacks at the state and local level. This isn’t 20-20 hindsight: the inadequacy of the stimulus was obvious from the beginning.
What we do know is that the inadequacy of the stimulus has been a political catastrophe.
The original failure is not having a political purpose in the first place, and confusing media performance with political performance. This is the deep misunderstanding of Reagan's success that has haunted Obama from the first beginning, confusing surface and depth. I'm not sure that I fully agree with some of Smith's commenters who claim that Obama doesn't know he's lying because he's too foolish/stupid/blind/[insert nasty personal put-down here]. The man is not stupid - he may be insulated from the full reality and wanting to believe the happy-happy joy-joy tales his economic minders give him, but he can watch Fox news with the rest of you - but he is handicapped by a lack of political purpose. He does not have firm objectives he wants to achieve, and therefore has no constant goal against which to measure his performance. Thus, he presents what he has; himself as the nice guy you should want to have as your neighbor, doing a heck of a job while the economic storm waters rise.
Critics claim that the desire to be liked and to be perceived as trying to do the right thing were Bill Clinton's greatest weaknesses, along with being too compliant to the wishes of the money elite. I don't think the first is actually true (Bill knew he was liked, just not by the press), while the second has some salience, since Bill has continued to pour his heart into doing things with his power and influence that will help ordinary people. It wasn't about appearance, but about results. The third claim, however, sadly is true. He allowed Summers and parasites of that ilk to have too much say in the financial rules, regulations and boundaries. When the Republicans stole the 2000 election, the system was ready for full exploitation.
Obama has taken the worst lessons of Reagan and the worst performance of Clinton and made them his own. He won the election based on a fiction (that he would bring change) and a fact (the economy was tanking). He and the party are now facing midterms with the fiction ripped away and the fact still firmly in place.
Thus, we have the irony that Obama is now being judged on the same basis as McCain - a peddler of bad policies that are immiserating the nation. Like McCain, his political objective is just to be President. The lack of more substantive goals, of, to use a derided phrase, ideology, to look to and work towards, leaves him with little to sell except himself, the leftover offering from the last round of elections.
It's unclear who will buy it this time around.